This is also in the Skywest 10-K
Growth Opportunities
During the five years ended December 31, 2006, our total operating revenues expanded at a compounded annual rate of 41.6% and the number of daily flights we operated increased from approximately 1,000 at the end of 2002 to approximately 2,400 as of December 31, 2006. With the exception of our acquisition of ASA, our growth during that five-year period was internally generated. We believe there are additional opportunities for expansion of our operations, consisting primarily of:
· Delivery of Aircraft Under Firm Order. We have firm orders to acquire eight additional new CRJ900s. In addition, we intend to operate 11 additional CRJ200s through third-party lease arrangements and sublease 12 additional CRJ700s from Delta during the year ending December 31, 2007. Additionally, we expect to place four owned CRJ200 spare aircraft into service in 2007. We have agreements with Delta or Midwest to place all 35 of these aircraft into revenue service, under long-term, fixed-fee contracts.
· Potential Opportunities from Delta’s Restructuring. We believe that as Delta restructures its fleet under bankruptcy protection, there may be new regional flying contracts that become available for qualified regional carriers. ASA holds certain rights to maintain its proportion of overall Delta regional flights, as well as its proportion of Delta’s regional flights to and from Atlanta. This may help ASA compete for new flying mandates, if any, that come into existence at Delta.
· Scope Clause Relief. “Scope clauses” are elements of major airlines’ labor contracts with their own pilots that place restrictions on the number and size of aircraft, or the amount of flight activity, that can be operated by major airlines’ regional airline contractors such as ASA and SkyWest Airlines. Greater liberalization of scope clauses generally creates more business opportunities for regional airlines. Since 2001, five major national airlines (American Airlines, Inc. (“American”), Delta, Northwest Airlines, Inc. (“Northwest”), United and US Airways, Inc. “US Airways”) have achieved some scope clause liberalization. If further efforts by major airlines to relax scope clause restrictions are successful, it may create incremental opportunities for regional airlines.
· Narrowbody Replacement Flying. A meaningful portion of the recent growth of the regional airline industry resulted from the replacement of major airline-operated narrowbody jet aircraft (such as 737s, DC9s, MD80s and A319s) with regional airline-operated jets on the same routes. The major airline affects this change in equipment to achieve an advantage in trip costs, unit costs, frequency or a combination of these benefits. At present, the fleets of the six major national airlines include a significant number of narrowbody aircraft that are more than 15 years old. Such older aircraft are frequently less fuel- and maintenance-efficient than new aircraft. If major airlines decide to substitute newer regional airline-operated equipment for any portion of these older narrowbody aircraft under their retirement, it may create incremental opportunities for regional airlines.
Good for SKYW shareholders...bad for pilots industry-wide.
